Accounting Entries for Bills of Exchange

The video tutorial covers the concept of bills of exchange, focusing on the accounting entries involved in honoring and dishonoring bills. It explains the process of retaining bills, the role of notary public in case of dishonor, and the implications of noting charges. The tutorial also discusses the renewal of bills and the involvement of banks in discounting and collecting bills. The session concludes with a brief mention of future topics and encourages viewers to consider the perspective of the drawee, Ms. Annie.

What is the correct entry when a bill is drawn on a customer?

• Debit cash account, credit sales account

• Debit bills receivable, credit customer's account

• Debit customer's account, credit bills payable

• Debit sales account, credit cash account

What happens if a bill is dishonored?

• The bill is considered paid

• The holder loses the money permanently

• The drawee automatically pays the bill

• The holder can approach the notary public

Who initially bears the noting charges when a bill is dishonored?

• The notary public

• The bank

• The holder of the bill

• The drawee

What is the process called when a new bill is drawn with an extended time period?

• Bill protesting

• Bill honoring

• Bill renewal

• Bill discounting

What entry is made if a partial payment is received?

• Credit partial amount to bills payable

• Debit partial amount to cash account

• Credit full amount to bills receivable

• Debit full amount to cash account

What does a bank do when a bill is discounted?

• Collects the bill amount from the drawee immediately

• Deducts charges and pays the remaining amount to the drawer

• Pays the full bill amount to the drawer

• Returns the bill to the drawer

What happens if a discounted bill is dishonored?

• The bank absorbs the loss

• The bill is automatically renewed

• The drawer must repay the bank

• The drawee pays the bank directly